Fortress Investment Group is the first U.S.-based hedge fund to become a publicly traded company and open the doors on the usually private industry, according to the Los Angeles Times. The initial public stock offering allows any investor to potentially get a piece of the large profits that are being generated by the business. Investors are buying a stake in the company, not in its funds. “It’s the natural evolution,” said Charles Gradante, a principal at Hennessee Group, which helps investors pick hedge funds. He expects more large hedge funds to follow with stock sales of their own. However, some analysts think that Fortress’ willingness to go public stems from industry concern about continuing to attract capital from its traditional base of wealthy investors. “These are very smart guys. If they’re selling, I probably don’t want to be buying,” said Steven Persky, head of Dalton Investments, a $1.1 billion hedge fund in Los Angeles. Fortress raised $630 million by selling 34 million shares to investors who had placed orders for the stock last week. The shares were $18.50 each, which Fortress had hoped to get. Fortress’ stock performance will depend on how well the company can keep its clients satisfied. As a stockholder “you’re paying the principals in advance for a cut of the fees they hope to make,” said Adam Sussman, an analyst with Tabb Group in New York. However, some people think that since Fortress is now forced to disclose information on its financial dealings, it might lose the ability to act under the radar. “Once you have public investors, life is different,” said Christopher Whalen, an analyst at Institutional Risk Analytics in New York. That may become more of an issue as competition increases in the hedge-fund and private-equity businesses and genuine bargains in stock, bond and other markets become harder to find, Whalen said. The staff of Money Management Executive ("MME") has prepared these capsule summaries based on reports published by the news sources to which they are attributed. Those news sources are not associated with MME, and have not prepared, sponsored, endorsed, or approved these summaries.
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